Tax Preparation IRS Rules, Retirement, and Special Topics 1 — Questions and Answers
Question 1: What is the 2024 contribution limit for a traditional or Roth IRA (under age 50)?
- $5,500
- $6,000
- $7,000 (Correct answer)
- $8,000
Correct answer: $7,000
The 2024 IRA contribution limit is $7,000 for individuals under age 50, with an additional $1,000 catch-up contribution allowed for those 50 and older.
Question 2: Required Minimum Distributions (RMDs) from traditional IRAs must generally begin at age:
- 70½
- 72
- 73 (Correct answer)
- 75
Correct answer: 73
The SECURE 2.0 Act raised the RMD starting age to 73 for individuals who turn 72 after December 31, 2022.
Question 3: A 52-year-old withdraws $15,000 from a traditional IRA. The early withdrawal penalty does NOT apply because:
- They are over 50 years old
- They are over age 59½, so no penalty applies — wait, they are 52, so the penalty does apply
- No exception exists and the penalty applies (Correct answer)
- The distribution is under $20,000
Correct answer: No exception exists and the penalty applies
The 10% early withdrawal penalty applies to individuals under age 59½ unless a specific exception (disability, first-home purchase, SEPP, etc.) applies.
Question 4: Contributions to a Roth IRA are made with:
- Pre-tax dollars and grow tax-free
- After-tax dollars and qualified withdrawals are tax-free (Correct answer)
- Pre-tax dollars and distributions are taxed
- After-tax dollars and distributions are taxed
Correct answer: After-tax dollars and qualified withdrawals are tax-free
Roth IRA contributions are nondeductible (made with after-tax money), but qualified distributions, including earnings, are completely tax-free.
Question 5: What is the penalty for failing to take a required minimum distribution from an IRA?
- 10% of the RMD amount
- 25% of the amount not distributed (Correct answer)
- 50% of the amount not distributed
- A flat $500 penalty
Correct answer: 25% of the amount not distributed
The SECURE 2.0 Act reduced the RMD failure penalty from 50% to 25% (and further to 10% if corrected within two years).
Question 6: The Net Investment Income Tax (NIIT) of 3.8% applies to which taxpayers?
- All taxpayers with investment income
- Taxpayers with MAGI over $200,000 (single) or $250,000 (MFJ) (Correct answer)
- Only corporate taxpayers
- Self-employed individuals with rental income
Correct answer: Taxpayers with MAGI over $200,000 (single) or $250,000 (MFJ)
The 3.8% NIIT applies to the lesser of net investment income or the amount by which MAGI exceeds $200,000 for singles ($250,000 for MFJ).
Tax Preparation IRS Rules, Retirement, and Special Topics 1
What is the 2024 contribution limit for a traditional or Roth IRA (under age 50)?